Bank of Israel Chief: Israel’s Economy Protected

November 20, 2008

Israelâ€™s economy is threatened but perhaps better protected than others, the governor of the Bank of Israel said.

Stanley Fischer told about 1,000 lay and professional leaders of the Jewish federation system Wednesday that during the worldwide economic crisis, Israel could be hurt as global buying power decreases. That’s because Israel exports 45 percent of the goods it produces, with 15 percent each of its Gross Domestic Product coming from sales to the United States and European Union.

â€œThere is no way we can be totally isolated,â€ Fischer said at a plenary meeting on the final day of the United Jewish Communities General Assembly.

Israel has seen a dip in its stock market that is commensurate with drops in markets globally, he said, but the nation’s economy is not overexposed to the credit crisis domestically. Nor were its banks overexposed to the subprime market because mortgages in the Jewish state generally require significant down payments and collateral.

â€œIsraeli mortgages are unadventurous,â€ Fischer said.

Also, between 2004 and 2006, major Israeli banks were forced to sell their pension and mutual funds, making them independent entities, so the banks are not fully exposed to market risk and are relatively safe.

Still, the country has cut its interest rate from 4.5 percent to 3 percent over the past four months to spur spending, and will continue to do so provided inflation does not get out of hand, Fischer said. The Knesset, he said, is considering an economic stimulus package that should take hold soon.

Fischer said it is time for concern but not panic in Israel, despite media reports.

â€œIt is critical in a situation like this above all to keep perspective and keep calm,â€ Fischer said. â€œNewspapers have to be sold, so one reads every morning frightening stories. This is not the true situation. We are doing better than most economies I know.â€